Committee of Public Accounts

TWELFTH REPORT: HELPING FARM BUSINESSES IN ENGLAND (HC 441)

Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:

"Defra is spending £250 million on a range of support to help farm businesses survive in the more competitive world which will result from major reform of the Common Agricultural Policy. It needs though to direct more of this support at those small- and medium-sized farm businesses - essentially, family farms - that need it most. This will help strengthen rural communities and provide consumers with a wider range of the foods they actually want to buy.

To date Defra has relied largely on capital grants to help farmers. Defra's own evaluations suggest these grants are of questionable value. The approach is certainly out of step with other countries where providing advice and assistance to help farmers connect with the marketplace and diversify is seen as being far more effective. More also needs to be done to focus on the supply chain and local co-operative initiatives. Defra should make it simpler for farmers to get support by reducing the number of programmes and streamlining the application process."

Mr Leigh was speaking as the Committee published its 12th Report of this Session, which examined measures put in place by the Department for Environment, Food and Rural Affairs to help farm businesses become more competitive, diverse and flexible.

Farms in England received around £1.6 billion in market-related subsidies in 2003 under the European Union's Common Agricultural Policy. Major reforms agreed in 2003 will bring about fundamental changes to these subsidies. Subsidies will be "decoupled" - no longer be linked to production - freeing farm businesses to produce what consumers want rather than what the subsidy regimes dictate. From 2005, many existing production-related subsidy schemes will be rolled into a single payment to each farm (the single farm payment), which in England will be based initially on the subsidy farms received between 2000 and 2002. Between 2005 and 2012, the basis for payment will shift in stages to the area of farmland under management.

All payments will be subject to "cross-compliance" with environmental and animal health standards, to deliver objectives such as a better environment, conservation and access for the public. Similarly, each member state has some discretion, through "modulation" and a "national envelope", to reduce farm subsidies and transfer those moneys to programmes for more environmentally-friendly farming and wider rural development.

Farm businesses need help to survive in this new market-led environment. The Department is responsible for a range of measures to help farm businesses become more competitive, diverse and flexible. These measures include farm business development schemes, processing and marketing grants, a vocational training scheme and the Farm Business Advice Service. In all, some £250 million has been allocated to these support measures between 2000 and 2006.

Much of that support has been in the form of capital grants, but experience from other countries suggests that other measures could have more success. These include a greater emphasis on advice, better targeting of support on those farms most in need, streamlining the number of separate support schemes and application processes, and a greater focus on supply chains and more co-operative working.

Over the next few years, the Department will need to establish a new set of farm business support measures for the period 2007-2013, within European Union rules, to help farm businesses adapt to the new subsidy regimes and greater market orientation. This will provide a significant opportunity for the Department to implement the Committee's recommendations.